Over-priced plans

I love flying.

Always getting distracted by overhead planes, I’m regularly tuning into flight radar to check out stuff.

Obtained my fixed and rotary wing license thirty years ago and would have the world aeronautical charts up on my walls if the family let me. The family doesn’t share my passion – flying is only a tolerable means to a better end, which is usually a holiday.

While I would like to check the detailed flight plan for each flight I take, my family only needs the brochure, if that.

So too financial plans – commonly referred to as Statements of Advice (SOA) – for our unique financial journey.


What’s an SOA worth?

When seeking financial advice buying a Statement of Advice is common practice.

But are they valuable?

I reckon Statements of Advice are like flight plans.

A flight plan is designed for the cockpit not for the paying passengers because that’s where they are most valuable. No commercial flight can push-back from the gate without their flight plan.

Well before the pilot sits into her seat, she has planned the alternate airports along her route, the weights and fuel loads, determined points of no return, top of climb and descent points, understood weather expectations, winds strengths at various levels, the number of passengers she is responsible for and conferred with her crew.

This is all documented, shared with air traffic control, the airline management and all necessary authorities on her flight plan. This compliant document is valuable, but it’s not shared, intended or even understood for paying passengers.

The only people who may value a flight plan are enthusiast nuts like me. The rest of them with me back in row 16 coming back from Melbourne last week, just want to safely get somewhere with a minimum of fuss. Unless they are in the right hands – i.e. those of the flight crews – flight plans don’t have much value.

Same with Statements of Advice.

If passengers don’t pay separately or value the flight plan, why do people continue to pay separately for Statements of Advice?


Plans change

The influences on financial lives are immense.

The financial products bought years ago have usually aged more than we have.

Legislative changes in areas such as tax and superannuation, innovation from new providers with more flexible offerings, changing sentiment due to scandals, changing economic conditions, best-selling financial fads, all affect the decision-making in our financial lives.

Also, we change.

Our circumstances, our jobs, our careers, our health, our luck, our opinion, our hopes, our patience, our awareness, or maybe it’s not even changes to us, but to those we are financially connected to.

So why do people pay for a Statement of Advice, that they don’t fully understand, that they probably can’t objectively implement, that they know is only a ‘good guess’ based upon initial conversations, and has a half-life in years and maybe even months?

It doesn’t make sense because it’s mainly a sales technique from a past era.

Unless you’re a capable pilot of your own financial life, able to objectively navigate your best possible financial path forward considering all the influences, the practice of paying for a financial plan is past its use-by date.


Relic of the past

When I flew back from Melbourne last week, my fellow passengers sitting in row 16 just wanted to get somewhere.

They were paying for the journey.

They didn’t need or value a flight plan.

When a financial journey encounters engrained over-spending habits, or a partnership splits, or governments changing the tax rules, or loss of health, or any of the inevitable stuff that will happen, the plan needs to adjust.

In the right hands, a statement of advice provides immense value, but only as a planning tool, particularly when the inevitable happens and our financial journeys need significantly re-adjustment. For our Certainty Advisers playing a principal advisory role, this occurs on average every three years.

Don’t get me wrong.

Statements of Advice are crucial to any significant financial planning process. Surgeons, builders, engineers, pilots, boards of directors all rely heavily upon detailed plans. However, unless you are as enthusiastic about financial plans as I am about flight plans, don’t seek or pay for the value in a Statement of Advice.

Understand the value to you of the proposed journey versus the full cost, in dollar amounts. Also ensure the relationship being offered is impartial – nothing included in the proposed journey provides additional benefit to anybody supporting your journey.

Each of us has a different financial journey with the only constant being changing options of good and bad paths. Whether expected or unexpected, at times our journey will be steep and other times not so. Each of us has a unique journey, and hopefully, our financial decisions are not based upon a Statement of Advice we bought and paid for years ago.

Your financial journey is priceless. Seek impartial relationships to support it, not another Statement of Advice.

What do you reckon?



Photo credit: Shutterstock_9815824



About Jim Stackpool

For nearly 30 years Jim has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, he leads a like-minded team of professional advisory firms seeking to create greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry. His latest book Seeking Certainty is available now.



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